Coffee loses steam after touching 7-year high

LONDON: Robusta coffee futures pared losses in Europe after falling over 4% on profit-taking and fund selling on Wednesday, a day after the market touched a seven-year high, traders said.

The market soared on Tuesday on the back of news about damage to stocks in Italy, just as supplies from Vietnam, the top producer of the beans used in instant coffee, started to run out. “It’s funds. They are getting out,” one dealer said.

By afternoon, the front-month September contract traded down $44, or 2.5%, at $1,696 a tonne after falling more than 4% to as low as $1,665 earlier in the session. The top of the range was $1,750 and total volume across all contracts was 4,777 lots.

The benchmark November contract fell $21, or 1.3%, to $1,549 after trading between $1,585 and $1,540. On Tuesday it had touched $1,586, its highest since June 1999. September’s premium over November narrowed to about $146, compared with as much as $175 on Tuesday.

The London market has risen by about 32% since the start of the year on a surge of interest from investment funds and worries about production in Vietnam. Market players agree prices are likely to remain volatile for the next few months until Vietnam starts to harvest its ’06-07 crop.

Euronext.liffe said late on Monday it had suspended 3,098 five-tonne lots of coffee stored in the port of Trieste, potentially cutting the amount of Robusta coffee available for delivery against London futures contracts by as much as 16%.

Dealers said it was important to find out how much of the coffee would be a total loss and how much could be re-certified.